Last February the Obama administration announced new foreclosure prevention programs. One of them allowed refinancing of some homes where the mortgages exceeded the value of the house, We wrote that “…four to five million homeowners who received their mortgages (or had them insured) through Fannie Mae or Freddie Mac will be able to refinance at a lower rate.”

Unfortunately the program had two limits. Homes not involving Fannie or Freddie were not eligible, nor were homes with mortgages that exceeded 105% of total current appraised value. As a result, only 20,000 mortgages have been rewritten under this program.

So, the government has just announced that homes where the mortgage is up to 125% of the current appraised value of the house will be eligible to refinance at lower rates. They estimate that up to three million borrowers will be eligible under this new limit.

Under normal circumstances, if your house is under water (your mortgage exceeds current value) you cannot refinance. This restriction will no longer apply if your mortgage is not more than 125% of the current value of your home. The government says this will save money. “While Fannie and Freddie will receive less money in payments, they will save from reduced foreclosures.”

Interest rates have been rising lately, so this program is not as attractive as it was when announced in February, but this program can still work for those people who feel totally gypped by the equity they have lost in their houses and the high interest rate they are stuck with. If you do not know if Fannie or Freddie have anything to do with your mortgage check your monthly statement or ask the company that services your mortgage.